RealtyTrac released its 2016 Rental Affordability Analysis, which shows that buying is still more affordable than renting in 58 percent of U.S. housing markets, despite home price appreciation outpacing rent growth in 55 percent of markets. The report also shows that the rise in rents is outpacing weekly wage growth in 57 percent of markets.
The analysis included recently released rental data from the U.S. Department of Housing and Urban Development (HUD), wage data from the Bureau of Labor Statistics along with public record sales deed data from RealtyTrac in 504 counties with a population of at least 100,000.
“Renters in 2016 will be caught between a bit of a rock and a hard place, with rents becoming less affordable as they rise faster than wages, but home prices rising even faster than rents,” RealtyTrac Vice President Daren Blomquist said. “In markets where home prices are still relatively affordable, 2016 may be a good time for some renters to take the plunge into homeownership before rising prices and possibly rising interest rates make it increasingly tougher to afford to buy a home.”
Across all 504 counties analyzed, average wage earners will need to spend 37 percent of their income on rents for a three-bedroom property in 2016, the report stated, slightly less than the 38 percent of income to make monthly house payments — assuming a 3 percent down payment and including mortgage, taxes, insurance and mortgage insurance — on a median priced home on average across all 504 counties.
Renting was more affordable than buying in 213 of the 504 counties analyzed (42 percent), including counties in Los Angeles, Houston, San Diego, New York City (Brooklyn) and Dallas. Buying was more affordable than renting in counties including those in Chicago, Phoenix, Miami, Southern California, Las Vegas and Detroit.Rents on three-bedroom properties will increase an average of 3.5 percent in 2016 compared with 2015 across all 504 counties analyzed, according to the HUD data. Meanwhile, average weekly wages in the second quarter of 2015 (the most recent wage data available) were up an average of 2.6 percent from a year ago and median home prices were up an average of 5 percent in the third quarter of 2015 compared with a year ago across all 504 counties.
Markets with the biggest increase in rents are counties in Sumter, S.C.; Burlington, N.C.; Goldsboro, N.C.; Houma-Thibodaux, La.; and Missoula, Mont. Among counties with a population of at least 1 million, those with the biggest increases in rents are Santa Clara County, Calif. in the San Jose metro area (up 9.3 percent); Travis County, Texas in the Austin metro area (up 8 percent); San Diego County, Calif. (up 7.5 percent); Cook County, Ill. in the Chicago metro area (up 7.3 percent); and Bexar County, Texas in the San Antonio metro area (up 7.2 percent).
Markets with the biggest decrease in rents are counties in Johnson City, Tenn.; Abilene, Texas; California-Lexington Park, Md.; Ithaca, N.Y.; and Roseburg, Ore. Among counties with a population of at least 1 million, those with the biggest decreases in rents are Suffolk and Nassau counties in Long Island, N.Y. (both down 6.8 percent); Clark County, Nev. in the Las Vegas metro area (down 1.4 percent); Sacramento County, Calif. (down 0.4 percent); and Contra Costa County, Calif. in the San Francisco metro area (down 0.3 percent).
The least affordable markets for rents (where average wage earners need to spend the highest percentage of their income on renting a three-bedroom property) in 2016 are counties in Honolulu; Washington, D.C.; New York City; and the northern California metros of Salinas, Santa Cruz and San Francisco. In all of the top five least affordable rental markets, average rents represent more than 60 percent of average wages.
The most affordable markets for rents in 2016 are counties in Huntsville, Ala.; Peoria, Ill.; Davenport, Iowa; Atlanta, Ga.; and Pittsburgh. In all of the top five most affordable rental markets, average rents represent 25 percent or less of average wages.
Out of 52 counties where the share of the millennial population (born between 1979 and 1993) increased at least 10 percent during the housing crisis, from 2008 to 2013, the most affordable were Fulton County, Ga., in the Atlanta metro; Durham County, N.C. in the Durham metro; Harris County, Texas, in the Houston metro; Dallas County, Texas, in the Dallas metro; and Mecklenburg County, N.C., in the Charlotte metro. Average rents accounted for 27 percent or less of average wages in all of the top five most affordable rental markets for millennials.